Understanding a Bankruptcy Loan in USA

M G Singh By M G Singh, 24th Dec 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/2_o0lp3a/
Posted in Wikinut>Money>Debt

Bankruptcy is bad, but there are ways you can get out of its trap with a loan called a bankruptcy loan

Getting out of Bankruptcy

In America there are nearly 1.6 million personal bankruptcies occurring every year. That’s a large number. America is one of the few nations in the world that thinks of bankruptcy as a reformist tool. It is possible to get a loan even after bankruptcy. Loans that can be availed after bankruptcy is called bankruptcy loans.
It’s reassuring to know that debt and credit is not a recent phenomena. Assyria, Babylon and Egypt have recorded cases of credit nearly 3000 years.
In America Store credit was common from colonial times and has been popular throughout our nation's history. Many items, including sewing machines and vacuum cleaners, were introduced into our homes on the installment plan.
The first credit card came out in 1951 and once the magnetic strip was introduced in the early 1970s, the use of credit cards has skyrocketed.
But, having all the credit available has a dark side. Some people take on too much debt and have trouble repaying back. Thus the need for bankruptcy protection. In America the current bankruptcy law was passed in 1978 and amended in 1984 with a last amendment in 2005.
With a few exceptions like student loans, child support and alimony payments to your spouse bankruptcy wipe out all debts. This is encouraging but the bad part is that bankruptcy remains in your credit report for 10 years. That’s a sobering thought. But that is not the end of the road for you as far as getting a loan is concerned.

However it is possible to get a loan after filing for bankruptcy. Such a loan is called a bankruptcy loan. A bankruptcy loan has a specific purpose and is a tool to help you get back from the ashes of debt and re-stand on your legs. It helps you to repair your finances and that way it’s important cannot be underestimated.

Getting a bankruptcy loan is not a difficult task if all the parameters are satisfied. These parameters include payment of all your creditors and your bankruptcy petition dismissed. In case you have filed a Chapter 13 (reorganization) bankruptcy then it is imperative that your creditors be paid their amounts in full before you apply for any loan. However in case you have filed a Chapter 7 bankruptcy then the rules are different. In this case there is an embargo of 2 clear years after your discharge before you can apply for a bankruptcy loan.

A bankruptcy loan is a good thing all in all. It’s the best way to prove to potential creditors that you are no longer a bad risk and do pay all your bills on time. Once you have a clear track record of paying your bills on time as well as maintained a credit card in good standing, you have every right to ask your creditors for reference letters. These letters will add to your value and prove to potential lenders that you are a credit worthy person.
Another important facet of life in America is that there are umpteen lenders who will offer you a loan while you are still in bankruptcy as a way of paying off your creditors. Take this with a pinch of salt and I don’t recommend it. It usually just paves the way for further debt by adding to an existing debt.

Going through bankruptcy can be a painful and embarrassing experience. Be sure you consider all possible alternatives before filing. You might find that bankruptcy is easy to get into but very, very difficult to get out of. However bankruptcy loans give people who have filed for bankruptcy many opportunities which might not come their way otherwise. They have a chance to own homes and even automobiles. Thus bankruptcy loans serve a purpose in American financial world.

Tags

Bad Credit, Bankruptcy, Bankruptcy And Loan, Loan

Meet the author

author avatar M G Singh
A man who spent his early years in Air Force. An avid writer with over 6000 articles and 60 short stories published.Two novels on the anvil for publication.

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Comments

author avatar viewgreen
24th Dec 2014 (#)

Very informative article and thank you for share a one good thing thing which happened in the US. :)

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author avatar M G Singh
25th Dec 2014 (#)

Thank you Viewgreen

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author avatar Fern Mc Costigan
25th Dec 2014 (#)

Very informative but true Madan, I was one of them!

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author avatar M G Singh
26th Dec 2014 (#)

Thanks Fern

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